You are working with the development team at a historic museum. The museum is in the middle of a large campaign to raise $1 million for a new building. You have a limited budget and need to attract the right kind of donor to the campaign. You are trying to decide which type of donor to cultivate. Your first choice is a young mom that likes to bring her children to the museum. This type of donor is likely to give in smaller increments of about $125 per year but has a churn rate of 15%. Your other choice is a charitable older couple. This couple gives big gifts, on average of $8,500 per year, but only could be counted on to give to the museum with a retention rate of 32%.

The young mom was easier to acquire as a donor; you just had to invite her to a special event which cost the museum $25 per person and then she would become a donor. The older couple was much more expensive to acquire; you had to personally cultivate them with many expensive outings, which cost the museum $3,500 per couple. For every donation dollar received, you will spend $0.25 in variable costs. Given your tight development budget, you can only target one group. The museum uses a discount interest rate of 8%.

Hint: Identify/calculate the following first: annual profit per donor, the cost to acquire the donor, churn rate, or retention rate. Round your answer to the nearest hundredth. Show all of your work for full credit.

Q: What is the young moms CLV?

A:

Q: What is the older couples CLV?

A:

Q: Given their CLVs, cost to acquire, and your budget, which donor would you focus on?

A: